Magic shoot for fan value during recession

The economy - Magic shoot for value

December 18, 2008|By Kyle Hightower, Sentinel Staff Writer

The Orlando Magic are experiencing what only can be described as Shaquille O'Neal-era success early this season. They return home from a West Coast road trip with a 19-6 record -- the third-best in the NBA's Eastern Conference.

The success comes as the Magic begin a four-game homestand against some of the NBA's elite teams. Games such as tonight's contest against the San Antonio Spurs and Saturday's clash with the Los Angeles Lakers are certain to draw big crowds and generate playoff-level excitement.

But in an economic climate that has seeming seen everyone looking for federal help, the Magic and the NBA haven't been immune to financial challenges.

The NBA's league office cut 9 percent of its U.S. workforce in October. Several teams' attendance has declined, including the Magic, who are down 5 percent from last season's average. And economists are predicting corporate sponsorships could get smaller.

Although they are not in dire straits, the Magic and the NBA are taking calculated steps to remain strong.

"The money that people spend to watch games is a discretionary item," said Raymond Sauer, a Clemson University economics professor and founder of the Sports Economist blog. "As the NBA knows, things like that get pulled back on in times like this. It's going to be real challenge for them."

What is the NBA strategy?

In April -- months before this fall's stock-market collapse and bailout frenzy -- NBA Commissioner David Stern met with the league's owners to discuss downward economic trends.

He had good reasons to be concerned. Last season's attendance fell 2 percent from the all-time high during 2006-07.

Eleven of 30 teams hit the league goal of 10,000 full-season tickets sold entering this season, slightly exceeding last season. But league-wide, season-ticket sales came in averaging just 8,500 per team last month -- down 4 percent from the same point a year ago. The league's average ticket price is about $49 per game, according to Team Marketing Research, a firm that analyzes pro-sports-ticket prices.

Stern stressed offering affordable, single-game tickets to keep arenas filled. He suggested every team offer at least 1,000 tickets per game for $10 or less -- double the league-mandated total of 500.

"We wanted to demonstrate to our fans that we want to keep our game as close to them as possible," Stern said.

What are the Magic doing?

The average price of a ticket to an NBA game has risen 2.8 percent compared to last year, according to Team Marketing Research. The Magic's average rose 4.8 percent, though its average of $40.30 is nearly $9 less than the league average.

The team offset the price increases by offering aggressive discounts. It started this summer with a 50 percent discount on season tickets. Fans could get a season ticket for $585 as part of a 20th-anniversary season-themed "rollback" offer.

The team dangled fan-oriented extras to potential ticket-buyers such as:

*Autograph sessions with All-Star center Dwight Howard.

*Unlimited concessions on certain offers.

*Opportunities to choose games in packages.

For single games, the Magic offer 1,000 tickets for $10 a game and have pledged to offer at least 500 tickets per game for $5 when they move into a new $480 million arena in fall 2010.

"Our general thinking has been to approach it with as many value-added opportunities as possible to try to address these challenging times," Magic Chief Operating Officer Alex Martins said.

Martins said season-ticket sales are higher than they've been since 1997, the last time the team reached the 10,000 goal, and the team is "very close" to achieving it this year.

What's ahead?

Kirk Wakefield, a Baylor University professor of sports sponsorship and sales, said the Magic have taken the right approach to attack the economic climate. But they also must be careful, he said.

"Season tickets are down, so the question is how to overcome the objection [to buying them]," said Wakefield, who has worked with several Texas teams, including the NBA's Dallas Mavericks. "Hopefully you don't devalue tickets. . . . Discounting is the easy way out. What you must do is add value."

The other key area is corporate money. The NBA collected $490 million in sponsorship revenue in 2007, but many of those companies are experiencing hardships. Wakefield said companies will be required to justify their investments in sports teams like never before.

Mercedes Benz recently pulled a sponsorship deal with Major League Baseball's Milwaukee Brewers. That's cause for trepidation among teams in all leagues.

Martins said the Magic are expecting to announce new corporate partners during the first quarter of 2009. He also said the new arena's 56 luxury suites are nearly sold out and that the team is "in negotiations for a naming partner as we speak."

A fan's perspective

Orlando resident Glenn Forrest, 53, was an original Magic season-ticket holder in 1989. He's maintained his commitment since then by splitting tickets with friends.

He said he likes the extra things the team has offered but thinks it's the on-court product that must stay strong to maintain the fan base heading into the new arena's opening.

That appears promising with NBA wunderkind Howard anchoring the Magic's best 25-game start since they opened the 1994-95 season at 20-5.

"It's about the team," Forrest said. "The bells and whistles are nice, but I want to see good coaching and players. It's nice to have a freebie once in a while, but the team is the sticking point."